Mobile based payment systems are a phenomenon that over the last 10 years have swept across Africa along with many other emerging economies. In 2007 Safaricom set up this system called m (for mobile) -pesa (Swahili for money) in Kenya, which essentially linked a bank account to your SIM card. Within 8 months m-pesa had over 1.1 million users and by 2009 US$3.7 billion had been transferred through the system equating to approximately 10% of Kenya’s GDP (Mbiti and Weil 2011). Following this triumph m-pesa spread across numerous central and eastern African countries within five years and then into other emerging economies in the following years (see figure 2, Monks 2017). This leapfrog in development that Africa has secured shows that this technology is solving a problem that sorely needed addressing. Solving issues such as security and the need for instant transactions were the aim, however the system that was put in place has led to a broad range of unforeseen yet favorable results.
Figure 4 (Mbiti and Weil 2011) shows the designed function of m-pesa when it was set up and these functions are still at the core of how people use m-pesa today eleven years on. The interesting thing is where these functions are being use, which is applicable in all of the Sub-Saharan countries. There are three areas that m-pesa is predominantly used for; urban to rural transfer; retail; payment of bills and using m-pesa as a savings account.
One of the most common transactions that are done is movement of money from urban to rural. As in many developing economies people leave rural areas to seek higher paid work in urban areas and support their family in rural villages. Before m-pesa money would have been sent through Western Union, Post Office transfer (Mbiti and Weil 2011) or sent on a bus in a package (Kabbucho et al, 2003). These all pose security or time disadvantages. Morawcyznski and Pickens (2009) found in their research that since the advent of m-pesa, users in urban areas sent smaller but more frequent payments, which, over all resulted in a more money being transferred. Not only is m-pesa safer to send money by, but it also has more points at which you can access your funds (see figure 6). Despite the obvious potential for uses in the rural, expansion into this market was slow due to four main factors: logistics (having to build new infrastructure for extended mobile signal); market research (understanding the differences of rural market compared to an urban one); accessibility (creating interfaces that are accessible to the perhaps, less tech savvy rural populations); and identification (finding a way to get around the lack of formal identification documents in rural areas) (Pénicaud and Katakam 2014).
Retail is another huge part of the m-pesa economy. Mbogo (2010) discusses the success and growth of micro-businesses due to mobile money. Plyler et al. (2010) contends that the introduction of m-pesa has led to the expansion of small business and has increased the circulation of money. Furth to this Mbogo (2010) cites “accessibility, cost, support and security factors” as the main reasons why small business owners are drawn to a system like m-pesa. Equally Anurag et al (2009) say that many “view this mode of payment as an easier form of cash delivery […] a system which is relatively affordable, personal and can be used anywhere and at any time”. In a busy city, such as Arusha, affordability and security are paramount to business owners and with the added bonus of convenience (Pousttchi, 2003; Omwansa 2009), m-pesa forms a near perfect system.
Finally, the payment of bills and m-pesa as a savings account; since the system has been in use for over ten years now many of those using it are able to trust it as they would a bank. With this trust more and more people are using it as a savings system. Between 2008 and 2009 Jack and Suri (2011) conducted research that showed those who used m-pesa to save had increased from 76% to 81% and those who save for emergencies had increased from 12% to 22% showing a sharp increase in trust.
In terms of bill payment, Jack and Suri (2011) highlight the convenience of using m-pesa to pay household bills such as electricity and water. They see m-pesa as a helpful alternative to “traveling to an often distant office with a fistful of cash and waiting in a long queue”, increasing security and saving time (p10).
Low-income and vulnerable households are often the largest population of “unbanked” (Tchouassi 2012). M-pesa was created for these people based around the UN’s Millennium Development Goals (MDGs) (Hughes and Lonie 2007, Buku and Meredith 2012,) A positive correlation has been found between access to finance and economic growth, which also aids in the reduction of poverty (Bruhn and Love 2009). M-pesa is facilitating this access and enabling many of the worlds unbanked to obtain essential financial services. Financial inclusion data from the World Bank’s Findex (financial index) shows a 22% rise in those with a formal bank account or mobile account between 2011 and 2014 in sub-Saharan Africa and a 55% rise in Tanzania (Datatopics.worldbank.org, 2014).
Female empowerment can come through independence and m-pesa can provide this to many women particularly those in rural areas who are often dependant on their husbands or families (Buku and Meredith 2012 p394). Not only does m-pesa provide the tools to be more independent but the system has also brought about more work opportunities for women. Being an m-pesa agent means effectively working as a walking ATM. Agents were pinafores that identify what network they are with (an agent can be affiliated with more than one network) and carry a certain amount of money on their phone(s) and cash on their person. If someone wishes to withdraw or deposit they can use an agent to do so. This work is available to anyone with a mobile phone, no education required. Although Tanzania has relatively equal primary attendance, female education beyond this level is poor (Data.worldbank.org 2018 [2]) and so many women are left without work depending on family. Agent work does not pay well (around US$3/day) but it is more than many women would have otherwise (Omwansa 2009). To critique this, one could argue that placing, perhaps some of the most vulnerable in society throughout the city with fairly large amounts of cash on their person could lead to problems, however the literature around m-pesa and agent work seems to only sing it’s praises.
Technological leapfrogging is when a country or area bypasses a whole section of technological development that other countries have taken to reach the final destination (Bhagavan 2001). Africa’s move into mobile technology is a key example of this – Tanzania’s mobile cellular subscription jumped from 8,252,000 in 2007 (at the inception of m-pesa) to 40,044,186 subscriptions in 2016, over less than 10 years (Data.worldbank.org, 2018 [1]).
In 2012 the sustainable development goals were established to try and push development forward in all areas of the world citing areas such as poverty, hunger and gender equality as issues. 193 countries signed the sustainable development goals and agreed to actively work towards the 17 goals put forward (Sustainabledevelopment.un.org, 2015). When looking at the relationship between female empowerment and finances there is research to suggest that the impact of control and access to money as well as micro-financing can lead to higher levels of political participation, improved practical skills, better access to government run programmes as well as increased likelihood of involvement in social movements or protests (Kabeer 2005).
From the literature that has been written it is clear that m-pesa’s impact on Tanzania, and the rest of the emerging economies of the world, is decidedly positive. Its influence on the macro and micro-economics is pushing much of Africa towards economic development and the unintended knock on effects are leading to exciting areas of gender equality. What much of the literature fails to explore is the negative sides of m-pesa. Very little of the research looks at issues such as regulation; Safaricom donates all interest earned on deposits to charity which allows them to avoid being regulated as a bank (Mbiti and Weil 2011). This is a clear gap in the governance of what is an important part of Africa’s financial infrastructure. Despite these issues being overlooked the day-to-day use and implementation of the system seems to have very few drawbacks.
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